“We Are Number One!”, Or Why At Least Broke Greece Is Not America

Submitted by IWB, on April 29th, 2012

A rather curious phenomenon that has been observed in the popular press lately is that on those rare occasions when total global public debt is demonstrated correctly on a country by country basis, i.e., includingcontingent liabilities, as well as various trans-national, public-sector backed guarantees (such as EFSF backstops), and most importantly the Net Present Value of pensions and healthcare, or the cost of the welfare state expressed in current dollars, there is one country that is systematically excluded. That would be the United States. Today we set the record straight by adding the US to the list where it rightfully belongs, and also answer the rhetorical question of why the US just so happens to be consistently omitted from such column-chart based, hair-raising classifications. Simply said, it is quite clear why the now defaulted Hellenic Republic could and should be forgiven in saying that “at least Greece is not America…”

Keep in mind this is purely a documentation of public debt in its broader definition. When one adds private financial and household debt, things get truly hilarious, as seen on the following chart also from Morgan Stanley (which unfortunately excludes such critical components of public debt as contingent and NPV of pension and healthcare) which shows why the UK, with its 950% global consolidated debt/GDP, is quite fond of infinite rehypothecation, or the iterational “fractional reserve” creation of credit money from one asset (most likely robo-signed away to someone, unclear quite who: just ask Jon Corzine how fiat money can evaporate when one tries to match it with the “asset” that spawned it), as many times as necessary to pay those record banker bonuses.

Incidentally, the reason why the US is again mysteriously underrepresented from this chart is not only due to ignoring the elephant in the room, or NPVed welfare costs, but because for a proper apples to apples comparison basis on total, consolidated cross-sector debt, one would have toalso account for all the shadow banking system debt, a number and concept which modern monetary theory still refuses to acknowledge, which was the primary source of thoroughly unregulated and deposit-free credit expansion in the US in the past 20 years, and which per Citi estimates from several years ago based on total assets held by custodial banks, would be well over double the US GDP alone!